Conservative policy. Consistent progress.

According to recent reports, the Philippines' banking sector will start implementing Basel III capital standards in 2014, notwithstanding the 2019 deadline. The country's banking sector was also among the few to emerge unscathed from the global meltdown of 2008. Some of the credit for both these mileposts is due to the tradition of conservative banking policy adopted by the Bangko Sentral ng Pilipinas (BSP), the country's Central Bank.

Years before the meltdown, the BSP embarked on a program of reform and closer risk supervision. As a result most of the local banks were reasonably positioned during the crisis to shift focus to profitable domestic opportunities like consumer lending. Prudent measures like higher credit, loss provisioning, capital reinforcement, etc., actually enabled these local banks to turn out a creditable performance even in the midst of the crisis.

Since then the sector has been able to make all-round progress on the back of a booming economy and banking reforms. Today, financial inclusion, channel banking and remittances, along with consumer lending, are the major themes in the sector.

Financial inclusion is a key priority of the BSP, given that only 2 out of 10 households have a savings account. The situation stems from lack of affordability - people just don't have the money, and access - 609 of the 1,634 municipalities don't have financial service providers. The BSP is now driving an innovative agenda to allow payment and remittance through convenience stores, moneychangers, mobile banking agents and other small establishments. Also, there is a strong microfinance sector working to spread financial inclusion.

International remittances are a key contributor to the economy, with expatriate Filipinos sending back almost US$10 billion during the first six months of last year. Banks are exploring mobile technologies like digital wallets to facilitate the flow of these funds.

Understandably, technology is high on the agenda and most banks are in the market for the entire range of solutions - from core to channel to mobility and beyond - and have earmarked more than Pesos 1.5 trillion for that purpose. Clearly, an industry built on conservative policy is looking at some liberal infusion of technology to take it to the next level of growth.